Stocks Pared Losses, But Still Closed Lower on EU Jitters

Published on Monday, 30 January 2012 19:08 Written by Christopher Lynn

New York, January 30^th (TradersHuddle.com) – Stocks erased most of their losses thanks to a late surge in the session. Ongoing worries over the euro zone debt crisis kept participants at bay, as the Greek debt restructuring talks dragged on without a deal and as EU leaders met in Brussels to sign off on the permanent bailout fund.

The Dow Jones Industrial Average fell 6.74 points, or 0.05%. The S&P 500 index lost 3.32 points, or 0.25%, while the NASDAQ dropped 4.61 points, or 0.16%.

The market started under pressure amid overseas weakness that came as Chinese shares sold off after returning from a week long holiday and as a lack of a deal on the Greek debt swap plan weighed on the European markets and the euro.

In Europe, stocks closed with sharp losses after Greek worries weighed on sentiment. Banks due to their exposure to the peripheral debt were the worst performers, also as French President Nicholas Sarkozy announced plans for a financial transaction tax, which had been in past rejected by the U.K.

Economic data was limited to a 0.5% increase in personal income and no change in personal spending during December. And a Dallas Fed survey that showed demand for small business and personal loans increasing.

After the Dow was down more than 100 points and the S&P 500 down more than 1%, participants returned to lift the market from session lows. Financials failed to participate in the stock market's rebound. Instead, the sector suffered a 1.0% loss, which makes it the poorest performing sector of the session. In contrast, tech stocks traded up to a 0.3% gain, making it the only key select sector trading in positive territory.

The Technology SPDR ETF (NYSE: XLK) gained 0.3% to 26.99 after trading very close to its all-time high of $27.19. Helping the rebound in the sector were telecom stocks, which had been one of the worst performers last week. Verizon (NYSE: VZ) gained 1.07% to $37.61, posting the second biggest percentage gain in the Dow Jones Industrial Average.

Big cap tech also helped the sector, with Microsoft (NASDAQ: MSFT) leading the blue chip gainers. Shares of Microsoft jumped 1.3% to $29.61 after it was upgraded to Overweight from Neutral at Atlantic Equities.

Apple (NASDAQ: AAPL) gained 1.28% to $453.01, trading close to its all-time high of $454.45, which was posted last week after the record shattering earnings. Apple shares moved higher following a bullish research note from Morgan Stanley that speculated the tech giant could sell 40 million iPhones in China during 2013. The firm said that it sees $10 per share upside to Apple’s profit in calendar 2013, as the company adds China Telecom and China Mobile to the existing iPhone carrier China Unicom.

Financials were under pressure following European banks lower and as participants took profits on the sector, which had seen a sharp rally since the start of the year. Bank of America (NYSE: BAC) tumbled 3% to $7.07, posting the biggest percentage decline in the blue chip index. BofA received additional downward pressure after Goldman Sachs downgraded the stock to a Neutral from Buy, citing execution risk.

Meanwhile, Citigroup (NYSE C) fell 2% to $30.23, following the weakness in the sector, despite Goldman upgrading the stock to a Buy from Neutral. Rival JPMorgan (NYSE: JPM) lost 0.54% to $37.01 after it was removed from Goldman’s coveted Conviction Buy List.

M&A was also at the forefront during the session. ABB (NYSE: ABB), the Swiss engineering giant, announced that it had agreed to acquire Thomas & Betts (NYSE:TNB), the electrical components maker, for $3.9 billion or $72 per share.

Pep Boys (NYSE: PBY), the auto parts retailer, surged 23.59% to $14.93 after a private equity firm said that it would acquire the company for about $791 million in cash.

Additionally airline stocks were on fire, with US Airways (NYSE: LCC) rallying 4.16% to $8.52 after a Wall Street Journal report speculated that Delta (NYSE: DAL) was looking at a possible bid for the company. According to the report, Delta, which jumped 3.66% to $10.77 in the session, was also looking at a takeover bid for AMR Corp., the bankrupt parent of American Airlines.

Elsewhere, Wynn Resorts (NASDAQ: WYNN), the luxury casino operator, tumbled 3% to $115.41 ahead of the release of Macau gaming revenue tomorrow on cautious comments from analysts regarding the gaming revenue at the Asian gambling capital.